Combinatorial Discrete Choice

35 Pages Posted: 2 Oct 2019

See all articles by Costas Arkolakis

Costas Arkolakis

Yale University - Department of Economics

Fabian Eckert

Princeton University - International Economics Section

Date Written: January 1, 2017

Abstract

Discrete choice problems with complementarities are prevalent in economics but the large dimensionality of potential solutions substantially limits the scope of their application. We define and characterize a general class that we term combinatorial discrete choice problems and show that it covers many existing problems in economics and engineering. We propose single crossing differences (SCD) as the sufficient condition to guarantee that simple recursive procedures can find the global maximum. We introduce an algorithm motivated by this condition and show how it can be used to revisit problems whose computation was deemed infeasible before. We finally discuss results for a class of games characterized by these sufficient conditions.

Keywords: Combinatorics, Extensive Margin, Multinationals, Discrete Choice, Scale Economies

JEL Classification: C00, F12

Suggested Citation

Arkolakis, Costas and Eckert, Fabian, Combinatorial Discrete Choice (January 1, 2017). Available at SSRN: https://ssrn.com/abstract=3455353 or http://dx.doi.org/10.2139/ssrn.3455353

Costas Arkolakis

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Fabian Eckert (Contact Author)

Princeton University - International Economics Section ( email )

Princeton, NJ 08544-1021
United States

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